No NSW deficits but 'challenges' looming

NSW Treasurer Gladys Berejiklian has promised a "horizon without a deficit in sight" in her debut budget, but the storm clouds are gathering in the form of looming federal cuts.

After just over two months in the job, Ms Berejiklian's first effort has turned up a record $2.5 billion surplus for the coming financial year and confirms a $2.1 billion surplus for 2014-15.

And she has rounded it out with a promise to deliver back-to-back surpluses across the forward estimates, along with spending promises of a record $19.6 billion on health and $12.8 billion for education this year.

But with the axe set to fall on federal contributions to hospitals and schools, Ms Berejiklian and Premier Mike Baird face a fight with Canberra before the cuts hit NSW in 2017.

"We don't shy away from that," Ms Berejiklian said on Tuesday afternoon, adding NSW would face revenue "challenges" in the coming years.

"It is an unsustainable position for us moving forward and, of course, the longer period of time goes on, the more the gap increases in terms of government education funding."

Asked what the government's plan B might be if she is unsuccessful in securing a turnaround from her "mate" and federal counterpart, Joe Hockey, Ms Berejiklian could say only: "We'll cross that path if we come to it."

The treasurer handed down her budget in the NSW parliament on Tuesday flanked by Deputy Premier Troy Grant and Transport Minister Andrew Constance - the man who had her job before an April cabinet reshuffle.

"I feel very much it's a reflection of the team effort of the government," Ms Berejiklian said.

"Every minister, every member of the government, has played a part in getting the budget where it is."

A good chunk of this year's better-than-expected result comes from stamp duty receipts, which are expected to come in at $7.3 billion.

About 75 per cent is from the residential sector, helped along by surging Sydney house prices.

But the bumper stamp duty takings only take the underlying surplus to $713 million, with accounting changes doing the heavy lifting in pushing up the headline figure.

This budget is also about what isn't yet in the piggy bank - the $20 billion that the Baird government hopes to raise from its poles and wires partial privatisation.

"We're only just getting started," Ms Berejiklian told the parliament.

She will set aside $591 million so major building projects that rely on the electricity lease money will be "shovel-ready" from the moment those funds start flowing.

Among the projects to be fast-tracked are Sydney's Western Harbour Tunnel, upgrades of the Mitchell, Newell and Pacific highways between regional centres, and the long-promised Parramatta light rail, which the government promises will help establish the western Sydney suburb as the city's second central business district.